THE DETERMINANTS OF LIQUIDITY AND ITS IMPACT ON PROFITABILITY OF COFFEE TRADE UNION IN ETHIOPIA COMMODITY EXCHANGE (ECX) IN CASE OF JIMMA ZONE

Abstract

Coffee commodity exchange is one of the business activities carried out in any given country. Well-functioning of trade unions in the business and adjustment of important factors is used to get optimum profit expected from the unions. This study aimed to identify determinants of liquidity and its impact on the profitability of coffee trade union in ECX trading platform. 68 Unions which had five years duration time as a union were included in this study. The data were collected from unions‘ record financial statement and from NBE and ESA. Descriptive and inferential statistics analysis methods were used. From multiple linear regression model result in the liquidity model independent variables such as net profit margin, capital adequacy, loan growth rate, inventories turnover, gross, domestic product and union size were statistically significant at 5% level of significance. The result in the model showed that as the value of capital adequacy and loan growth rate of unions increased the availability of liquid asset of the unions would be increased at Jimma coffee commodity trade unions (ECX). In the first model of profitability the factors such as inventories turnover and capital adequacy were determinant of liquidity which had significant impact on profitability of the trade unions. In similar manner in the second model of profitability analysis result determinant of liquidity such as capital adequacy and inventories turnover had significant impact on profitability of the trade unions, so more emphasis should be given to the aforementioned factors in order to sustainably upgrade profitability of the trade unions in the study area.